Diageo, Radico Khaitan to form JV for IMFL

Diageo India, the wholly-owned subsidary of the world's largest premium spirit company Diageo has signed a 50:50 joint venture agreement with Radico Khaitan, the country's second largest spirit company,  to explore the large and developing Indian Made Foreign Liquor (IMFL) segment in the country. Diageo had recently chalked out plans to re-enter the IMFL segment in India having exited it a couple of years ago.

Diageo's most popular global brands include Johnnie Walker premium whisky and Smirnoff vodka. The proposed venture will bring together the strengths of the two companies in brand marketing  and distribution to create innovative international quality products for the consumer in the IMFL segment in India.

Radico Khaitan has informed the Bombay Stock Exchange that the companies have entered into a 50:50 JV agreement, which is subject to obtaining the requisite regulatory and other approvals.

Sources from Radico said the two companies will however, continue to operate in their own independent businesses outside of the JV and will maintain their respective brand portfolios.

Asif Adil, the new managing director of Diageo India, had earlier told Business Standard that the company would tie up with leading local players for bottling and distribtuion to explore the IMFL market. "The company is also toying with the idea of getting into the fast growing beer and wine markets in India to tap emerging opportunities and we will expolre all these new segments with our own products from the international portfolio using the bottling and distribution networks of local partners with whom we are in talks," Adil added.

These manufacturing, distribution and marketing arrangements will be with leading local players in the respective segments through joint ventures and strategic alliances, he said. Diageo has already tied up with a large bottling unit in Chennai for its IMFL foray and few marketing and distribution tieups are likely to be signed soon.

However, he had mentioned that since the company's main focus would remain in the premium whisky and vodka segment, the current India specific startegy also includes substantial investments for market expansion in these segments.

Diageo India had been focused on building its portfolio of international brands led by brands such as Smirnoff Vodka and Johnnie Walker Whisky in India. However, the plan for re-entering IMFL and also the wine and beer market comes at a time when the market for  international spirits brands in the country is expanding faster with whisky consumption pegged at 7-8 lakh cases annually reporting between 10 and 12% growth and the other two segments are poised to grow manifold following the proposed market liberalization by state governments.

Diageo currently enjoys about 90% share of the country's  2 million cases premium vodka market and about 80% of the scotch whisky market.